Lower gasoline prices a welcome sight for Southern Californians

Southern California motorists have welcomed steadily falling gasoline prices in recent weeks after being hammered by record highs in early October.

The relief arrived in time for holiday travelers who have already hit the road for Las Vegas, San Francisco and other locales. And it appears the lower prices will hang around for another couple of months, experts say.

On Wednesday the average price for a gallon of regular unleaded gas in the Los Angeles-Long Beach region was $3.59, down 21 cents from $3.80 a month ago but up a penny from $3.58 a year earlier, according to the AAA Daily Fuel Gauge Report.

The region hit an all-time high on Oct. 9 when a gallon of regular topped out at $4.71. The price spike was fueled by low inventories and refinery problems.

The Inland Empire - which posted an all-time high of $4.69 per gallon on Oct. 8 - has also experienced a downward trend in recent weeks.

On Monday, the average price for regular in the two-county region was $3.55 compared with $3.78 a month ago and $3.53 a year earlier.

The drop in prices couldn't come soon enough for Nick Nicassio, owner of Nick's Limousine Service in Arcadia.

"When prices are high it's a killer," he said. "There's nothing you can do. You can't raise your rates one week because gas prices go up, and then raise them the next week because they've gone up again. My clientele wouldn't accept that."

Nicassio opted to bite the bullet - and it was painful.

"I have a fleet of five Lincoln Town Cars, and my fuel cost is normally $3,800 to $4,200 a month," he said. "But when gas was at its peak I was spending $5,800 to $6,000 a month on fuel. I'm glad it's gone back down again."

High gas prices are also painful when you're in the furniture business.

Jim Boyd, a sales associate and manager at Al's Discount Furniture in Woodland Hills, said his company makes about 50 deliveries a week. When gas prices spike, it adds up quickly - not just for Al's but for customers as well.

"When prices peaked, people just quit shopping," Boyd said. "When you have to spend $60 to $80 for a tank of gas, that gets expensive. When everyone quits shopping that cuts our business down by about 30 to 40 percent."

Boyd said Al's opted not to increase its fee for deliveries.

"There's a saying in this business that you can't take the margin to the bank," he said. "We just had to make up for it in volume."

Boyd said the recent drop in gas prices has brought back much of his lost business.

Figures from the California Energy Commission reveal that California's production of gas for in-state use was 6.2 million barrels for the week that ended Dec. 14, down 9.1 percent from the previous week but up 3.5 percent from a year earlier.

California refineries also produce gas for use in Oregon, Arizona and Nevada.

That production hit 768,000 barrels for the week that ended Dec. 14, up 18.9 percent from the week before and up 62.7 percent from a year earlier.

The commission also tracks gasoline inventories, and a chart on the agency's website shows that California's inventory of gasoline has been trending upward since late September.

California had more than 6.5 million barrels of gasoline in stock as of Dec. 14. That was up 4.4 percent from the week before and up 25.6 percent from a year earlier.

"We're well above average for this time of year in inventories," commission spokesman Rob Schlichting said. "We've got plenty of supply, so prices should continue to fall."

That may be true for now. But Bob van der Valk, a fuel pricing analyst, said prices will begin heading up again in early 2013.

"On Feb. 14, California refineries have to stop making the winter blend of gas and start making the summer blend," he said. "The first shipment will go out at the end of February, and it will be at the terminals by March."

The turnaround often disrupts output at refineries, in some cases necessitating a brief shutdown. Plus, refineries make about 10 percent less gasoline per barrel during the summer since the extra refining process vaporizes some of the product, van der Valk said.

"You can get 22 gallons of the winter blend in a barrel, but just 20 gallons of summer blend per barrel," he said. "We'll be up over $4 a gallon by Memorial Day."

But for now, lower prices are the norm. A Food 4 Less in Long Beach was selling gas for $3.29 per gallon Wednesday, while it was $3.31 per gallon at an Arco station in Azusa.

The lowest prices in San Bernardino County could be found at Costco in Rancho Cucamonga and at Sam's Club and Arco in Ontario, all of which were selling regular for $3.31 per gallon.

Those lower prices are one reason the Automobile Club of Southern California has projected an all-time high for Christmas/New Year's Eve travel this year. Nearly 7.3 million Southern Californians are expected to travel through the end of the year.

Eighty-eight percent of them are expected to travel by car, with Las Vegas, San Francisco and San Diego among the top destinations.

The price of oil rose sharply Wednesday on higher U.S. home prices and hopes of a budget deal in Washington. U.S. benchmark crude jumped $2.37, or 2.7 percent, to finish at $90.98 per barrel in thin post-Christmas trading in New York.

Gasoline was at its lowest price for the year on Dec. 20 last Thursday, at an average of $3.22 a gallon.

Staff Writer Andrew Edwards and The Associated Press contributed to this report.